Dollar Drops In Value Against Other Currencies

Elaine Meinel Supkis

I've been asked via email, what is the future going to be, money-wise? Looking at history and my tea leaves as I drink some orange pekoe, all I can say is, this set-up we are entering is going to be DEFLATION, not inflation. This means a depression, not stagflation. Being at the Hubbert Oil Peak, the price of oil will drop, thanks to millions unable to buy any oil at all, but this won't 'save' us a penny if our wages and assets drop even faster.

Curreny news is a very confusing business due to the fact that all governments outside of China, are desperately trying to attract savers, those hard working folk who don't invest but instead, save money in low interest-bearing accounts.

By Steve Goldstein & Wanfeng Zhou, MarketWatch
Last Update: 2:19 PM ET Nov 24, 2006

NEW YORK (MarketWatch) -- The dollar slumped to a 19-month low versus the euro and a 2 1/2-month low against the yen Friday on growing worries that the interest-rate differential between the U.S. and other parts of the world will narrow soon.

Recent economic data out of the U.S. and the euro zone heightened speculation that the Federal Reserve might lower interest rates earlier than expected while the European Central Bank will continue to lift rates to curb inflation. Comments from People's Bank of China warning about the risk to Asian currency reserves from further dollar declines also weighed heavily on the greenback.

"Any single one of these 'news' items is not sufficient to push the dollar materially lower; however, in aggregate, they are. That, we think, is what is happening: it is the aggregate accumulation of these bearish bits and pieces that has the dollar on the defensive," said Dennis Gartman of the Gartman Letter.

Asia hates a weak dollar. They have lent us literally over a trillion dollars to keep our dead currency active. This action rests upon the tiny savings accounts of millions of thrifty, laboring Chinese peasants and workers. Japan used to be the source of world-wide savings accumulations but that has been pretty much wiped out by the last 15 years of depression there.

Because Skull and Bonesman, Greenspan and his frat buddies in the White House needed political power, they kept interest rates way below the rate of inflation, hammering anyone so deluded as to save.

WASHINGTON - Americans’ personal savings rate dipped into negative territory in 2005, something that hasn’t happened since the Great Depression. Consumers depleted their savings to finance the purchases of cars and other big-ticket items.

The Commerce Department reported Monday that the savings rate fell into negative territory at minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but had to dip into previous savings or increase borrowing.

The savings rate has been negative for an entire year only twice before — in 1932 and 1933 — two years when the country was struggling to cope with the Great Depression, a time of massive business failures and job layoffs.

Still is negative. And will stay that way. My own bank, a credit union founded in 1933 by state employees in New York because of lack of banks, probably won't go belly-up in the coming crash only because they didn't play games with derivatives like so many 'big' banks. Banks have to 'invest' the money they garner from savers. This means usually loaning it out but when interest rates are below the rate of inflation the banks LOSE MONEY!

They can't do it! It fails! There are many tricks to cover up this sort of monkey business such as the Federal Banking system printing money secretly which is why Greenspan and now Bernanke are hiding the M3 numbers that tell us how many bucks are printed on flimsy paper. Then, they hope no one notices the value of the money has been diluted but now, overseas, everyone is aware that the presses are humming and despite attempts to keep the dollar stable, it is falling relative to all other currencies.

The average American can't make a run on any bank anymore. Most people live paycheck to paycheck and all the charts showing debt accumulation shows it shooting up like a rocket the last six irresponsible years and the way people run on banks in this situation is to be unable to pay the loans and all the loans become 'unperforming' which means dead as doornails and seizing the main assets: houses, will fail because the lenders can make money only if the house has any value and much of America's housing will end up valueless if no bank can loan any money to buy one!

This has happened before. More than once! If one does have money, buying properties is very easy in a depression. Tremendously easy. But few people have enough spare change for this. During the Great Depression, great swaths of McMansions became instant White Elephants and became rooming houses or orphanages or some such, many of these imposing Victorian hulks became haunted houses.

Keynes thought he created a nifty trick to undo the resolute grinding corrections caused by reckless spending coupled with no saving: have the government spend money!

The total amount of saving in a society is determined by the total income and thus, the economy could achieve an increase of total saving, even if the interest rates were lowered to increase the expenditures for investment. The book advocated activist economic policy by government to stimulate demand in times of high unemployment, for example by spending on public works. The book is often viewed as the foundation of modern macroeconomics. Historians agree that Keynes influenced U.S. president Roosevelt's New Deal, but disagree as to what extent. Deficit spending of the sort the New Deal began in 1938 had previously been called "pump priming" and had been endorsed by President Herbert Hoover. Few senior economists in the U.S. agreed with Keynes in the 1930s. With time, however, his ideas became more widely accepted.

There is really only one thing that opens the public purse: war. We see this all the time. As Congress chews the pencils when deciding how much to spend on college loans for the lower classes (rejecting increasing this fund for the last 6 years!) the sky is the limit for military adventures. All depressions end with wars because it gets rid of exess housing, stimulates the government and it brings out all sorts of savings programs because no one can buy anything anyway, anymore!

Roosevelt tries to save America.

On 3/3/33, (Warning: this was a hyper/hyper magic day for the satanic ritualists) there was such a run on all the banks as the few savers decided to cash in their deposits, the entire banking system collapsed.

THE FIRST FIRESIDE CHAT

President Franklin D. Roosevelt: My friends, I want to talk for a few minutes with the people of the United States about banking—to talk with the comparatively few who understand the mechanics of banking, but more particularly with the overwhelming majority of you who use banks for the making of deposits and the drawing of checks. I want to tell you what has been done in the last few days, and why it was done, and what the next steps are going to be. I recognize that the many proclamations from the state capitals and from Washington, the legislation, the Treasury regulations and so forth, couched for the most part in banking and legal terms, ought to be explained for the benefit of the average citizen. I owe this in particular because of the fortitude and the good temper with which everybody has accepted the inconvenience and the hardships of the banking holiday. And I know that when you understand what we in Washington have been about I shall continue to have your cooperation as fully as I have had your sympathy and your help during the past week.

First of all, let me state the simple fact that when you deposit money in a bank the bank does not put the money into a safe deposit vault. It invests your money in many different forms of credit—in bonds, in commercial paper, in mortgages, and in many other kinds of loans. In other words, the bank puts your money to work to keep the wheels of industry and of agriculture turning round. A comparatively small part of the money that you put into the bank is kept in currency—an amount which in normal times is wholly sufficient to cover the cash needs of the average citizen. In other words, the total amount of all the currency in the country is only a comparatively small proportion of the total deposits in all the banks of the country.

What, then, happened during the last few days of February and the first few days of March? Because of undermined confidence on the part of the public, there was a general rush by a large portion of our population to turn bank deposits into currency or gold—a rush so great that the soundest banks couldn’t get enough currency to meet the demand. The reason for this was that on the spur of the moment it was, of course, impossible to sell perfectly sound assets of a bank and convert them into cash except at panic prices far below their real value.

By the afternoon of March 3, a week ago last Friday, scarcely a bank in the country was open to do business. Proclamations closing them in whole or in part had been issued by the governors in almost all of the states.

FDR created many new systems to deal with the total meltdown of our economic money system. One thing he couldn't do was get rid of the Federal Reserve that created this problem and made it worse by the day. Since then, the Federal Reserve's officers have worked hard to undo everything FDR created, especially Social Security, the government's secure system for saving that is totally divorced from the Federal Reserve, the clowns there can't touch it...until now.

For the last 20 years, these criminal elements have worked hard at spooking everyone into ditching this system and turn it into another arm of the Federal Reserve whereby it can be used just like the banks use money: on insane deals that can blow up in concert, destroying the entire economic system!

Bush and his gang are frantic to destroy Social Security. One tool has been to seize it by fiat by running the government in the red and handing IOUs to foreign powers---this will force us into hock one day and all the SS money will not be re-disbursed to the American workers but will be funnelled to the International Monetary Fund or worse, the Chinese Central Banking system.

These entities don't want a weak dollar that is losing value via 'inflation' but a strong dollar that buys a lot of labor here in America. Buddy, can you spare a dime? Under Hoover, millions of crying children went to bed hungry while the Federal Reserve and the Federal Government were frantically DESTROYING food in order to make it more expensive so people would stop 'hoarding' money!

This ass-backwards understanding of money wasn't fixed by Roosevelt or anyone because of WWII. We got full employment, high savings, guaranteed pensions via Social Security and we got this nifty empire, to boot. To prevent hoarding, Eisenhower instituted high taxes on the rich. This robinhood taxation prevented a post-war recession.

Europe continued with the high taxes long after Americans decided to spend like drunks on shoreleave. One example is the price of fuel: Europe paid thrice our rate and thus, kept vehicles much smaller and more efficient. Interest rates were kept higher because Europe wanted to have a savings base to operate off of, in America, this was derided.

When our banks nearly collapsed in 1978-1979, interest rates and the price of gold shot through the roof. My father-in-law used to shift his savings all over the place, seeking somewhere it would make more than the rate of inflation and it was only after our economy was practically shut down and no one, and I do mean no one (like, um, ME) could get any loans at all no matter how secure! Then my father-in-law got his first savings accounts that actually build up an eggnest!

The fact of the matter is, today, everyone's eggnest is their nest. And this lopsided nesting is destabilizing the banking system which can't rest on this base alone if people stop paying their loans. This process of failure of loan payments is beginning to cause the housing market to sag and it can collapse as suddenly and thoroughly as the WTC buildings.

Now, after all this fun chat about currency problems, time for a depression-era cartoon. Cab Calloway and Betty Boop in 1933.

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